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Texas Growth Fund
January 2011

The Texas Growth Fund (TGF), which was created by the Texas Legislature and approved by Texas voters in 1987, is an Austin-based, equity-oriented investment fund. The TGF is backed by the state’s four largest public trust funds: the Permanent School Fund (PSF), the Permanent University Fund (PUF), the Teacher Retirement System (TRS) and the Employees Retirement System (ERS). Each of these trust funds, as well as any local government trust fund, is authorized to contribute to TGF “trusts.” Each of the four major state trust funds is represented on the Texas Growth Fund Board of Trustees

TGF created three investment trusts, the first of which was formed in 1991. The 1991 Trust had $52 million contributed by TRS and the PUF. The 1995 Trust had $75 million contributed by TRS, the PUF, and the San Antonio Fire and Police Pension Fund. The most recent trust, the 1998 Trust, was created with $450 million contributed by TRS and ERS.

The Texas Growth Fund Management Corporation (TGF Corp.), which was created in 1992, administers TGF. TGF Corp. developed a set of investment criteria for TGF. TGF invested in companies with a meaningful presence in Texas. In addition, TGF preferred companies with annual revenues of $15 million to $250 million, demonstrated profitability and proven management and financial strength. The fund’s managers preferred to invest in manufacturing, distribution and service companies in stable and established markets.

The most recent recorded investment for the 1998 Trust was in December 2005. In previous years, TGF Corp. would analyze about 250 business opportunities each year. Based on TGF Corp. criteria for investment, eight to 10 companies were typically deemed worthy of investment. These choices included companies as diverse as Austin-based Classic Cable and Turfgrass America.

Altogether, the Texas Growth Fund invested in 44 companies since its creation. Through Dec. 31, 2007, TGF had invested $411.7 million. The 1998 Trust expired Dec. 22, 2003, and no new companies have been selected for investment since that time. The only investment activity since that time has been follow-on investments in companies already in the 1998 Trust portfolio.

The Texas Growth Fund officially liquidated the 1991 Trust in November 2008 and liquidated the 1995 Trust in June 2009. The 1998 Trust still has two active investments, but the Growth Fund anticipates that both of those will be liquidated in 2011.

Based on data gathered for each trust as of 24 months from its last investment, full-time employment at TGF portfolio companies declined 10 percent since the initial investments were made, with 852 fewer staff. Part-time employment declined by 25 percent with 264 fewer staff.

Job Creation and Retention in Texas by Portfolio Companies

Capital Formation and Expenditures Within Texas
(dollars in thousands)

(1) 24-month time restriction based on date of last investment.
(2) Co-Investment includes all contemporaneous financings (debt or equity), except debt refinancings and seller financings.